Running a Startup

March 16, 2007

Patience and Persistence Can Pay Off

From the FreshBooks Blog:

usergrowth33months2.gif

In our Barenaked Apps Panel at SXSW, Ryan Carson advised anyone starting a web app to plan for 3 potential outcomes: success, limited success and failure. He’s right – you need to think those outcomes through and determine how you will respond to each scenario. I’d like to add something to this though. There are many people out there with big dreams that are building web apps in their spare time these days – it’s exciting. Unfortunately I think a lot of them are building with false expectations (a post on false expectations to follow soon). They think if their app does not take right off, they should pack it in. My thinking is – don’t.

If you have a measure of success when you launch, I bet you’ve got something. What’s the measure of success? It could be almost anything, like how many visitors from to your site or how many people trial your service. How about getting someone you don’t know to pay for your service? If a person you don’t know signs up and pays out of no where – even one person – then there is a good chance you are on to something.

If you’re on to something it’s time to hunker down and get to work. Launching does not mean you’ve arrived at easy street and you can sit back and relax – it’s your introduction to the grind. The beauty is that web businesses are a ton of fun to run, so the grind can be really enjoyable.

Not buying any of this? Maybe you will find this inspiring. When FreshBooks launched, we were called 2ndSite (we’ve since rebranded) and we did not have our first paying user until month two, but we believed in what we were doing – that fuelled us – and saw trials everyday which was exciting. So we hunkered down and that graph at the top of this post is what our growth has looked like over the past 30 months (we’ve been at it for 33, but I could not get info for the first three months).

Work hard, take care of your customers, innovate and the rest will take care of itself.

This is the second in a series of posts (here is the first) I’ll be doing over the next few days about starting a web business. If you liked this one, subscribe to our feed and stick around.

January 26, 2007

Thoughts on Team Building

As posted on the FreshBooks blog: 

FreshBooks is growing – not just our user base (which crossed the 125,000 mark yesterday) – but our staff. As our company grows I am working hard to ensure that me and our other team members grow into our evolving roles as leaders, managers and domain experts. To that end I have been thinking more and more about team dynamics.

When you introduce a new member into a team there are a number of approaches you can take, and based on their knowledge and what they add to the team, you should vary your approach. Personally, I believe in giving responsibility to new team members as a sign of trust – a project I know they will succeed at. By giving a new team member an important project you send strong signals of trust and respect to the new member as well as the incumbents. These signals are paramount. That said, once you have given the project over, you have work to do.

To ensure the success of your new team member with their project, you need to support them. Presumably the new team member will be reporting back to the group. This could happen in a series of meetings or one grand finale. Any way you slice it, it is important that you make yourself available to your new team member at reasonable intervals. You need to check periodically (daily, weekly, hourly, whatever) so that the new member can bounce ideas off of you and you can validate the work that they have done. This is especially important leading up to the presentation.

To ensure the success of that meeting, you need to be on board with WHATEVER is being presented. That way this new person has buy in. If they have that, then their presentation is likely to be a success. With a series of successes like this, the new team member is well on their way to becoming an important part of the team.

January 4, 2007

FreshBooks is Hiring

We’re hiring at FreshBooks. We need a web designer and a web developer.

If you know anyone who wants to enjoy doing those kinds of things in a relaxed and professional environment, surrounded by people who genuinely enjoy each other and what they do, please drop Kathy a note [her email can be found on the job descriptions]. We’re looking to hear from one and all by January 19th, 2007.

Please pass this post along to family and friends – it’s always great to get references. Thanks to David Crow for posting those descriptions on his excellent UX job board.

December 22, 2006

Make a Wish For Charity

From the FreshBooks Blog:

My friend and fellow Canadian entrepreneur Austin Hill sent me the following note:

Hi Mike,

I’m working on a project related to my new startup called Gifter.org and I would really appreciate you putting the word out to your friends or on your blog about it. We are going to raise $1 million dollars for charity. If you have friends that you would help us share this with, it would be really appreciated. Especially if you could ask some friends to vote for us on Digg or Netscape, so we can get some more attention for this worthy cause.

In lieu of sending holiday cards this year, we have decided to run a social giving experiment called the Million Dollar Blog Post. You can go the post, and make a wish for the world. We are arranging for $1 to be donated to charity for every wish left in the comments of this post. Feel free to share a few wishes with your friends, family or co-workers, or in your case if you think it would be of interest to your listeners let me know. We would like to collect a million wishes, and a million dollars (for charities). We aren’t sure how long this will take, but given the speed at which ideas spread on the Internet, we are optimistic about our goal.

Just go have a moment of fun and make a wish for the world on us. Project Ojibwe

has donated to the following charities so that you could make a wish for the world. (Our next sponsor has another sample here)

If you are interested in sponsoring someone else’s wishes, the instructions on how to do this can be found here. It can be a great way to promote to the world what you care about.

Happy holidays, and I look forward to reading your wishes.

-Austin

I’m headed off to post my wish right now. I hope you will post your wish too.

December 15, 2006

On Decision Making: How We Roll at FreshBooks

From the FreshBooks blog:

When you run a small business or you work in teams, you have a lot of decisions to make. Reaching conclusions can be really challenging sometimes and exchanges can get heated.

Here at FreshBooks we are consensus builders. Ideas come from anyone and everyone, and no one’s point of view is a safe from attack. This way of decision making can present challenges though, mainly because it is impossible to get everyone to agree all the time. So, one thing we learned a long time ago – back when it was just Joe and I building the business, and both of us are fairly determined to see our points of view through – is we learned to say, “Ok…let’s sleep on it”.

We resort to “let’s sleep on it” as soon as we feel we have exhausted the productivity of a conversation. This happens frequently in meetings and via email discussions. Recognizing that moment when your discussion ceases to be productive is a skill and it can be honed over time. For us the upside of “sleeping on it” is that invariably we come – as a group – to the right decision the next day…which may be a mix of two or more points of view. Better still when we do decide, everyone feels they had some ownership of the outcome.

In decision making it is rare that you have to make a decision RIGHT NOW, so don’t be afraid to sleep on it.

December 11, 2006

Wake Up Web 2.0…and be Prepared to Spend

One of my themes on this blog has been, “You need to spend on marketing if your web app is going to succeed”. There are exceptions to every rule, and these exceptions are most often the “Success Stories” that get press. This does would-be (naive?) entrepreneurs a disservice in my opinion because it sets false expectations for people building and releasing new tools.

Ryan Carson – who is almost single handedly trying to dispell these kinds of mistruths with his Bare Naked App project – just posted a piece that describes some of his growing pains with Amigo and how he is coming to the realization that spending on marketing may be necessary. It’s a good read and the comments are interesting too.

I replied and said this:

Ryan,

Great post…I think a lot of web app developers will be wrestling with the question of “how much to spend on marketing” over the next few years and I think that is only a sign that the web app space is growing up a little…and that’s a good thing.

Here is a post I wrote a while back that touches on the fact the you need to spend:

http://www.michaelmcderment.com/2006/06/07/your-sexyunsexy-mix/

So, if you want to bootstrap and grow organically (which is a wonderful way to run your own business, it just takes a little longer than the traditional VC route of FAST, FAST, FAST), then challenge is finding your balance between spending and not spending on marketing. It’s a tough balance, but definitely something you will need to put some thought into as more and more apps are released and things get crowded.

I also touched on some of these things in a Work Happy interview here:

http://www.workhappy.net/2006/10/interview_with_.html

Probably worth a look for anyone starting a web app.

This trend is something that was inevitable and it is something I touched on a while back in my From the Web 2.0 Trenches: How to Build Real Businesses post/essay last November.

October 6, 2006

May Your Road Be Merry

Big news flash in the Canadian tech scene. Mark Evans – one of Canada’s best read bloggers and one of my mesh conference co-founders – has crossed over from journalism to running a start-up.

Earlier this week b5 Media received $2 Million in venture financing from J.L. Albright and Brightspark. Getting Mark to join the team will only enhance their credibility. Having worked closely with Mark in building mesh, I can tell you that Mark brings some intangibles to the table that would benefit any start-up. He’s energetic, and totally enthusiastic about what he does. He is also forthright and honest – important qualities I’d want in any team I would build. Mark also brings experience to the team as he’s left journalism to run a start-up before.

Good luck Mark – I’ll be rooting for you.

August 25, 2006

Have You Seen This Before?

As posted on the FreshBooks Blog:

I’m about to coin a phrase, or make a fool of myself by describing a concept that has been around for ages. Hold on to your hats, here come my thoughts on “transitional services”.

Transitional Services are services that help facilitate a user’s transition from one platform to the next – or at the least, ease their pain.

Whenever there is a platform shift, there is transition, and straddling. For example, for the past ten years the photography industry has been shifting from celluloid to digital. The industry and its consumers are undergoing a transition from one platform to another. This transition has consequences. Many users are reluctant to transition because they are invested in the first platform (i.e. “I have cameras and film, slide projectors and photo albums”). Once the decision to transition has been made, users may want to bring their old platform content (think printed photos) with them to the new platform format (think scanning photos) and they find themselves at a point where they are straddling the new platform and the old. Both the transition and the straddling phases create pain and opportunity in the marketplace.

With me so far?

I wrote Paul Kedrosky a note saying I think there is a huge and growing market for transitional services in the Web 2.0. I pointed out how helping people get from offline processes to online processes – while helping to ease the pain of the straddling phase – will be a strategy that start-ups and established players can leverage and that I foresee an increasing number doing so in the coming years.

This whole conversation was sparked by FreshBooks recent release of its transitional ground mail service. The solution FreshBooks is selling is to help business transition their invoicing/receivables process online where significant benefits can be realized (streamlined processes, reduce costs, and improved customer relations). Businesses want to get online, but there is a world of pain awaiting them in the transition phase (“How do we build the service we need?”) and straddling phases (“How do we manage our cash flow when half our clients pay us online and half pay us offline?”)

That ability to gradually transition customers from ground mail invoices to online invoices and recurring billing is what FreshBooks offers, but there are other examples of businesses that help facilitate traditional office activities. You can create and send photo albums as gifts via Flickr. This is an example of a reverse transitional service where Flickr is facilitating a transition from the new platform (digital images) to the old (printing and mailing images).

What’s magical about all of this, and a hallmark of a transitional service in the Web 2.0, is how the line between the online world and the offline world blurs. The slicker the service, the more seamless the delivery, the more the offline world gets pulled online.

In terms of opportunities, I foresee more and more services leveraging transitional strategies and delivering transitional services as backend services and incremental revenue generators.

So, while none of these concepts is new, and the act of delivering such services has been around for some time, I have seen no attempts to define the phenomenon, so I have done it here. If this has already been done elsewhere, please let me know. As I have not had the time to consider the implications of transitional strategies as much as I would like, I encourage you to sound off with your own thoughts. Can you think or other examples? Better yet, can you think of industries in need of transitional services, where ripe opportunities exist? Please comment below.

July 25, 2006

Pricing Web Services: Step 2 – No Annual Plans

A while ago I wrote a piece about pricing web services and getting them into buckets. I mentioned I’d write more so here goes.

Pricing is an incredibly hard thing to do. As I mentioned in the last post, getting things into three buckets is really important, so I want to talk today about yearly packages.

At first blush offering your customers a yearly option may seem like a great idea. For one, you lock them in for a year – this is good. For two, you have more cash right now – this is also good. There are two major problems with yearly packages though.

The first problem is too much choice. When you talk about getting your pricing into three buckets to make your pricing simple, adding yearly packages (assuming you are doing monthly packages in the first place) will double the number of packages you offer. So right out of the blocks you have 6 packages which is three too many. [Note: if you question this, read the pricing buckets post].

The second problem is the smoothness of your cash flow. Reporting, monitoring and improving monthly cash flow is much more manageable and consistent with monthly packages than when you try to manage yearly subscriptions. As a start-up cash flow is king. Demonstrating steady growth is key when you are talking with stakeholders. Monthly packages can derail your revenue reporting if you have a relatively high or low number of annual sign-ups in any given month. With monthly packages, these fluctuations and their effects are moderated.

I’m going to post more on pricing again in the future. By the way, Levi and I are presenting at DemoCamp 8 tonight. If you are there, please say hello.